In the U.S., we have registered tradenames and service marks including, but not limited to our brand name,names and logo, "QVC," "Quality Value Convenience," "Find What You Love, Love What You Find," the "Q QVC Ribbon Logo," and "Q" and trademarks for our proprietary products sold such as "Arte D’Oro," "Cook’s Essentials," "Denim & Co.," "Diamonique," "Nature's Code," "Northern Nights" and "Ultrafine Silver." Similarly, foreign registrations have been obtained for many trademarkstradenames and service marks for our brand namenames, logo and propriety products including, but not limited to, "QVC," the "Q QVC Ribbon Logo," "Q," "Cook’s Essentials," "Denim & Co.," "Diamonique" and "Northern Nights."

We consider the service mark for the "QVC" nameand "HSN" names the most significant trademark ortradenames and service markmarks held by us because of itstheir impact on market awareness across all of our geographic markets and on customers’ identification with us. As with all U.S. trademarkstradenames or service marks, our trademarktradename and service mark registrations in the U.S. are for a ten year period and are renewable every ten years, prior to their respective expirations, as long as the trademarkstradenames or service marks are used in the regular course of trade.

On October 17, 2018, QRG announced a series of initiatives designed to better position its QxH business (“QRG Initiatives”). As part of the QRG Initiatives, QVC will close its fulfillment centers in Lancaster, Pennsylvania and Roanoke, Virginia and has entered into an agreement to lease a new fulfillment center in Bethlehem, Pennsylvania, which commenced in 2019 (see note 9 to the Company expectsaccompanying consolidated financial statements). QVC recorded transaction related costs of $1 million and $60 million during the years ended December 31, 2019 and 2018, respectively, which primarily related to repayseverance, other QRG Initiatives and the closure of operations in France as discussed below. No transaction related costs were recorded during the year ended December 31, 2020.

In the fourth quarter of 2018, QVC recorded a charge related to the potential closure of its operations in France. For the year ended December 31, 2018, QVC recorded $9 million in severance expenses, which is included in transaction related costs (see note 16 to the accompanying consolidated financial statements), and $4 million in inventory obsolescence related to these exit activities. No material severance or inventory obsolescence expenses related to these exit activities were recorded during 2019 or 2020. The formal announcement to execute the closure was made in March 2019 and broadcasting for QVC in France was subsequently terminated on behalf of zulily.March 13, 2019.

QVC engages with CommerceHub,CBI, which was an approximately 99%is a wholly owned subsidiary of LibertyQurate Retail and prior to the completion of its spinoff from Liberty in July 2016, to handle communicationscommon control transaction between QVC and Qurate Retail, included as part of HSN. CBI is not part of the vendors for drop ship salesresults of operations or financial position of QVC presented in the accompanying consolidated financial statements. During the year ended December 31, 2020, QVC and returns.CBI engaged in multiple transactions relating to sourcing of merchandise, personnel and business advisory services. Refer to note 1314 to the accompanying consolidated financial statements for further details.

Item 1A. Risk Factors

The retail business environment is subject to intense competition, and we may not be able to effectively compete for customers

We operate in a rapidly evolving and highly competitive retail business environment. Although we are the U.S.'s’s largest television shopping retailer, we have numerous and varied competitors at the national and local levels, ranging from large department stores to specialty shops, electronic retailers, direct marketing retailers, wholesale clubs, discount retailers, other televised shopping retailers such as EVINE LiveShopHQ in the U.S., Jupiter Shop Channel in Japan, HSE 24(Formerly referred to as HSE24) in Germany and Italy, and Ideal World in the U.K., and M6 Boutique in France, infomercial retailers, Internet retailers, including livestream shopping retailers, and mail-order and catalog companies. Many of our current and potential competitors have greater resources, longer histories, more customers and greater brand recognition than we do. They may secure better terms from vendors, adopt more aggressive pricing, offer free or subsidized shipping and devote more resources to technology, fulfillment and marketing. Other companies also may enter into business combinations or alliances that strengthen their competitive positions. Such business combinations or alliances may result in competitors with greatly improved financial resources, improved access to merchandise, greater market penetration than they previously enjoyed and other improvements in their competitive positions. This may cause our customers to elect to purchase products from a competitor that they would have historically purchased from QVC, resulting in less revenue to QVC.

Our net revenue and operating results depend on our ability to predict or respond to consumer preferences

Our net revenue and operating results depend, in part, on our ability to predict or respond to changes in consumer preferences and fashion trends in a timely manner. We develop new retail concepts and continuously adjust our product mix in an effort to satisfy customer demands. Consumer preferences may be affected by many factors outside of our control, including responses of competitors and general economic conditions. Any sustained failure by us to identify and respond to emerging trends in lifestyle and consumer preferences could have a material adverse effect.

Our long-term success depends in large part on our continued ability to attract new customers and retain existing customers and we may not be able to do that in a cost-effective manner

In an effort to attract and retain customers, we engage in various merchandising and marketing initiatives, which involve the expenditure of money and resources, particularly in the case of the production and distribution of our television programming and, to a lesser butan increasing extent, onlinedigital advertising. We have spent, and expect to continue to spend, increasing amounts of money on, and devote greater resources to, certain of these initiatives, particularly in our continuing efforts to increasingly engage customers through online and mobile channelsdigital marketing and to personalizing our customers'customers’ shopping experience. These initiatives, however, may not resonate with existing customers or consumers generally or may not be cost-effective. In addition, costs associated with the production and distribution of our television programming and costs associated with onlinedigital marketing, including search engine marketing (primarily the purchase of relevant keywords),on third-party platforms such as Google and Facebook, have increased and are likely to continue to increase in the foreseeable future and, if significant, could have a material adverse effect to the extent that they do not result in corresponding increases in net revenue.

In the U.S., we currently distribute our programming through affiliation or transmission agreements with many television service providers, including, but not limited to, Comcast, AT&T/DIRECTV, Charter, DISH Network, Verizon and Cox. Internationally, we currently distribute our programming throughVodafone Kabel Deutschland GmbH, Media Broadcast GmbH, SES ASTRA, SES Platform Services GmbH, Telekom Deutschland GmbH, Unitymedia GmbH, Tele Columbus and Primacom, Jupiter Telecommunications, Ltd., Sky Perfect and World Hi-Vision Channel, Inc., A1 Telekom Austria AG, UPC Telekabel Wien GmbH, British Sky Broadcasting, Freesat, Freeview and Virgin Media, and Mediaset, Hot Bird and Sky Italia, Orange, Free, Canalsat, Bouygues Telecom and Fransat.Italia. Our affiliation agreements with distributors are scheduled to expire between 20182021 to 2027.

We may be unable to obtain renewals with our current distributors on acceptable terms, if at all. We may also be unable to successfully negotiate affiliation agreements with new or existing distributors to carry our programming and no assurance can be given that we will be successful in negotiating renewals with these distributors or that the financial and other terms of these renewals will be acceptable. Although we consider our current levels of distribution without written agreement to be ordinary course, the failure to successfully renew or negotiate new affiliation agreements covering a material portion of television households could result in a discontinuation of carriage that may adversely affect our viewership, growth, net revenue and earnings.

The failure to maintain suitable placement for our programming or to adapt to changes in consumer behavior driven by online video distribution platforms for viewing content could adversely affect our ability to attract and retain television viewers and could result in a decrease in revenue

We are dependent upon the continued ability of our programming to compete for viewers. Effectively competing for television viewers is dependent, in substantial part, on our ability to negotiate and maintain placement of our programming at a favorable channel position, such as in a basic tier or within a general entertainment or general broadcasting tier. The advent of digital compression technologies and the adoption of digital cable have resulted in increased channel capacity, which together with other changing laws, rules and regulations regarding cable television ownership, impacts our ability to negotiate and maintain suitable channel placement with our distributors. Increased channel capacity could adversely affect the ability to attract television viewers to our programming to the extent it results in:

In addition, if our programming is carried exclusively by a distributor on a digital programming tier, we may experience a reduction in revenue to the extent that the digital programming tier has less television viewer penetration than the basic or expanded basic programming tier. We may experience a further reduction in revenue due to increased television viewing audience fragmentation to the extent that not all television sets within a digital cable home are equipped to receive television programming in a digital format.

Our future success will depend, in part, on our ability to anticipate and adapt to technological changes and to offer elements of our programming via new technologies in a cost-effective manner that meetmeets customer demands and evolving industry standards. Our failure to effectively anticipate or adapt to emerging technologies or competitors or changes in consumer behavior, including among younger consumers, could have an adverse effect on our competitive position, businesses and results of operations.

Any continued or permanent inability to transmit our programming via satellite would result in lost revenue and could result in lost customers

Our success is dependent upon our continued ability to transmit our programming to television providers from our satellite uplink facilities, whichand for our distributors to continue to receive our programming at their satellite earth station downlink facilities. These transmissions are subject to FCC regulation and compliance in the U.S. and foreign regulatory requirements in our international operations. In most cases, we have entered into long-term satellite transponder leases to provide for continued carriage of our programming on replacement transponders and/or replacement satellites, as applicable, in the event of a failure of either the transponders and/or satellites currently carrying our programming. Although we believe we take reasonable and customary measures to ensure continued satellite transmission capability and we believe that these international transponder service agreements can be renewed (or replaced, if necessary) in the ordinary course of business, termination or interruption of

satellite transmissions may occur, particularly if we are not able to successfully negotiate renewals or replacements of any of our expiring transponder service agreements in the future.

Our Ecommerce business could be negatively affected by changes in search enginethird-party digital platform algorithms and dynamics or search engine disintermediation as well as our inability to monetize the resulting web traffic

The success of our Ecommerce business depends on a high degree of website traffic, which is dependent on many factors, including the availability of appealing website content, user loyalty and new user generation from search portalsvarious digital marketing channels that charge a fee (such as Google). In obtaining a significant amount of website traffic via search engines, we utilize techniquesfee. Third-party digital platforms, such as search engine optimization ("SEO") (which is the practice of developing websites with relevantGoogle and current content that rank well in “organic,” or unpaid, search engine results) and search engine marketing ("SEM") (which is a form of Internet marketing that involves the promotion of websites by increasing our visibility in search engine results pages through the use of paid placement, contextual advertising, and product listing ads) to improve our placement in relevant search queries. Search engines, including Google,Facebook, frequently update and change the logic that determines the placement and display of results of a user’s search, or advertiser content, such that the purchased or algorithmic placement of advertisements or links to the websites of our Ecommerce business can be negatively affected. Moreover, a search engine could, for competitive or other purposes, alter its search algorithms or results causing our website to place lower in search query results. If a major search engine or third-party digital platform changes its algorithms in a manner that negatively affects our paid advertisement distribution or unpaid search ranking, or if competitive dynamics impact the effectiveness of SEO or SEM in a negative manner, the business and financial performance of our Ecommerce business would be adversely affected, potentially to a material extent. Additionally, Mobile application distribution platforms, such as Apple’s App Store and the Amazon Appstore for Android, may require that third party digital platforms and ecommerce companies present users with an option where the user chooses to opt-in or opt-out of tracking technology used by these third party digital platforms or included in mobile applications. To the extent that users opt-out of tracking technology used by third party digital platforms on which we advertise or users of our applications opt-out of tracking technology included in our applications, our ability to monitor and improve customer experience and track the effectiveness of our digital marketing strategies would be adversely impacted. Furthermore, our failure to successfully manage our SEO and SEMdigital marketing strategies could result in a substantial decrease in traffic to our website, as well as increase costs if we were to replace free traffic with paid traffic. Even if our Ecommerce business is successful in generating a high level of website traffic, no assurance can be given that our Ecommerce business will be successful in achieving repeat user loyalty or that new visitors will explore the offerings on our site. Monetizing this traffic by converting users to consumers is dependent on many factors, including availability of inventory, consumer preferences, price, ease of use and website quality. No assurance can be given that the fees paid to search portalsthird-party digital platforms will not exceed the revenue generated by our visitors. Any failure to sustain user traffic or to monetize such traffic could materially adversely affect the financial performance of our Ecommerce business and, as a result, adversely affect our financial results.

Our Ecommerce business may experience difficulty in achieving the successfulongoing development, implementation and customer acceptance of applications for smartphone and tablet computingpersonal electronic devices, which could harm our business

Although our Ecommerce business has developed services and applications to address user and consumer interaction with website content on smartphonepersonal electronic devices, such as smartphones and other non-traditional desktoptablets, the ways in which consumers use or laptop computer systems (which typically have smaller screens and less convenient typing capabilities),rely on these personal electronic devices is continually changing. If the efficacy of the smartphone application is still developing. Moreover, if smartphone computing services proveor applications we develop in response to bechanges in consumer behavior are less effective for the users of our Ecommerce business and the smartphone segment of Internet traffic grows at the expense of traditional computer and tablet Internet access,or are not accepted by consumers, our Ecommerce business may experience difficulty attracting and retaining traffic on these platforms. Any failure to attract and retain traffic on these personal electronic devices could materially adversely affect the financial performance of our Ecommerce business and, as a result, adversely affect our financial results. Additionally, as new devices and new platforms are continually being released, it is difficult to predict the challenges that may be encountered in developing versions of our Ecommerce business offering for use on these alternative devices, and our Ecommerce business may need to devote significant resources to the creation, support, and maintenance of their services on such devices.

Our business is subject to online security risks, including security breaches and identity theft

Through our operations, sales, marketing activities, and use of third-party information, we must be ablecollect and store certain non-public personal information that customers provide to provide for securepurchase products, enroll in promotional programs, register on websites, or otherwise communicate to us. This may include phone numbers, driver license numbers, contact preferences, personal information stored on electronic devices, and payment information, including credit and debit card data. We gather and retain information about employees in the normal course of business. We may share information about such persons with vendors, contractors and other third-parties that assist with certain aspects of our business. In addition, our online operations depend upon the transmission of confidential information over public networks and protect our confidentialthe Internet, such as information on our computer systems.permitting cashless payments. Unauthorized parties may attempt to gain access to our or our vendors’ computer systems by, among other things, hacking into our systems or those of our vendors, or through fraud or other means of deceiving our employees or vendors.vendors, burglaries, errors by our or our vendors’ employees, misappropriation of data by employees, vendors or unaffiliated third-parties, or other irregularities that may result in persons obtaining unauthorized access to our company’s data. As we have significantly increased the number of employees working remotely due to the COVID-19 pandemic, and as our vendors and other business partners move to remote work as well, we and our partners may be more vulnerable to cyber attacks. The techniques used to gain such access to our or our vendors’ computer systems, data or our customer information, disable or degrade service, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized until launched against a target. Increasingly, unauthorized parties are exploiting access they gain to third party vendors to target companies that do business with these vendors, this may include third party vendors with whom we do business. We have implemented systems and processes intended to secure our computer systems and prevent unauthorized access to or loss of sensitive data, but as with all companies, these security measures may not be sufficient for all eventualities and there is no guarantee that they will be adequate to safeguard against all data security breaches,cyber attacks, system compromises or misuses of data. Although we have not detected a material security breach or cybersecurity incident to date, we have been the target of events of this nature and expect to be subject to similar attacks in the future. Any penetration of network security or other misappropriation or misuse of customer, employee or other personal information, whether at our company or any of our vendors, could cause interruptions in the operations of our business and subject us to increased costs, fines, litigation, regulatory actions and other liabilities. Security breaches could also significantly damage our reputation with consumers and third parties with whom we do business.business, which could result in lost sales and customer and vendor attrition. We continue to invest in new and emerging technology and other solutions to protect our retail commerce websites, mobile commerce applications and information systems, but there can be no assurance that these investments and solutions will prevent any of the risks described above. If we are unable to maintain the security of our retail commerce websites and mobile commerce applications, we could suffer loss of sales, reductions in traffic, diversion of management attention, and deterioration of our competitive position and incur liability for any damage to customers whose personal information is unlawfully obtained and used. We may be required to expend significant additional capital and other resources to protect against and remedy any potential or existing security breaches and their consequences.consequences, such as additional infrastructure capacity spending to mitigate any system degradation and the reallocation of resources from development activities. We also face similar risks associated with security breaches affecting third parties with which we are affiliated or otherwise conduct business online.business.

System interruption and the lack of integration and redundancy in these systems and infrastructures may adversely affect our ability to transmit our television programs, operate websites, process and fulfill transactions, respond to customer inquiries and generally maintain cost-efficient operations

Our success depends, in part, on our ability to maintain the integrity of our transmissions, systems and infrastructures, including the transmission of our television programs, as well as our websites, information and related systems, call centers and fulfillment facilities. We may experience occasional system interruptions that make some or all transmissions, systems or data unavailable or prevent us from transmitting our signal or efficiently providing services or fulfilling orders. We are in the process of implementing new technology systems and upgrading others. Our failure to properly implement new systems or delays in implementing new systems could impair our ability to provide services, fulfill orders and/or process transactions. We also rely on affiliate and third-party computer systems, broadband, transmission and other communications systems and service providers in connection with the transmission of our signals, as well as to facilitate, process and fulfill transactions. Any interruptions, outages or delays in our signal transmissions, systems and infrastructures, our business, our affiliates and/or third parties, or deterioration in the performance of these transmissions, systems and infrastructures, could impair our ability to provide services, fulfill orders and/or process transactions. Fire, flood, power loss, telecommunications failure, hurricanes, tornadoes, earthquakes, acts of war or terrorism, acts of God and similar events or disruptions may damage or interrupt

television transmissions, computer, broadband or other communications systems and infrastructures at any time. These risks are exacerbated by our move to a more remote workforce in response to the COVID-19 pandemic.

Any of these events could cause transmission or system interruption, delays and loss of critical data, and could prevent us from providing services, fulfilling orders and/or processing transactions. While we have backup systems for certain aspects of our operations, these systems are not fully redundant and disaster recovery planning is not sufficient for all possible risks. In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption.

The processing, storage, sharing, use, disclosure and protection of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights

In the processing of consumer transactions and managing our employees, our business receives, transmits and stores a large volume of personally identifiable information and other user data. The processing, storage, sharing, use, disclosure and protection of this information are governed by the privacy and data security policies maintained by us. Moreover, there are federal, state and international laws regarding privacy and the processing, storage, sharing, use, disclosure and protection of personally identifiable information and user data. Specifically, personally identifiable information is increasingly subject to legislation and regulations, including changes inchanging legislation and regulations, in numerous jurisdictions around the world, the intent of which isare intended to protect the privacy of personal information that is collected, processed and transmitted in or from the governing jurisdiction. Compliance with these laws and regulations, or changes in these laws and regulations may be onerous and expensive and may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance. For example, the European Court of Justice in 2015 invalidated the U.S.-EU Safe Harbor Framework, which facilitated personal data transfers to the U.S. in compliance with applicable European data protection laws. The U.S.-EU Safe Harbor Framework was one of the mechanisms we relied upon to transfer European personal data to the United States. In addition, third party vendors and service providers withEU-U.S. Privacy Shield, which we do business also relied onreplaced the U.S.-EU Safe Harbor Framework, for their access to our European customer and employee personal data. The business of companies that relied on the U.S.-EU Safe Harbor Framework may be impacted by its invalidation. A new data transfer framework, the EU-U.S. Privacy Shield, became fully operational on August 1, 2016, but isprovided a mechanism to comply with data protection requirements when transferring personal data from the subjectE.U. to the U.S. On July 16, 2020, the Court of litigation. In addition, Standard Contractual ClausesJustice of the European Union invalidated the E.U.-U.S. Privacy Shield, and imposed new obligations on the use of SCCs - another key mechanism to allow data transfers between the U.S. and the EU -E.U. It is also subject to litigation over whether Standard Contractual Clauses can be used for transferring personal data from the EU tounclear when the U.S. and the E.U. will adopt a new data transfer framework to replace the EU-U.S. Privacy Shield. The European Commission has proposed draft revised SCCs, which may be adopted in 2021. Further, the European Parliament and the Council of the European Union have approved a General Data Protection Regulation,GDPR, which becomesbecame effective on May 25, 2018, and which will givegives consumers in the E.U. additional rights and imposeimposes additional restrictions and penalties on companies for illegal collection and misuse of personal information. Finally, in 2017, the European Commission proposedThe E.U. is continuing to consider whether to adopt new regulations regarding privacy and electronic communications that would complement GDPR, including additional regulation of the Internet tracking tools known as “cookies.” In the absence of such new regulations, European data regulators are indicating their intent to take greater enforcement efforts with respect to the use of cookies. The "Brexit" withdrawal of the United Kingdom (U.K.) from the E.U. may cause transfers of personal data from the E.U. to the U.K. to be subject to increased regulations that would adversely impede the continued sharing of E.U. personal data with the U.K. California has enacted the California Consumer Privacy Act of 2018 (“CCPA”), which, among other things, allows California consumers to request that certain companies disclose the types of personal information collected by such companies. The CCPA became effective on January 1, 2020. The California Attorney General has issued draft implementing regulations and guidance regarding the law. In November 2020, California voters approved the California Privacy Rights Act of 2020 (“CPRA”), which amends and expands the CCPA and establishes the California Privacy Protection Agency to implement and enforce consumer privacy laws. Most of the CPRA’s provisions become effective on January 1, 2023. Other states in the United States are also separately proposing laws to regulate privacy and security of personal data. Our failure, and/or the failure by the various third party vendors and service providers with which we do business, to comply with applicable privacy policies or federal, state or similar international laws and regulations, or changes in applicable laws and regulations, or any compromise of security that results in the unauthorized release of personally identifiable information or other user data could damage our reputation and the reputation of our third party vendors and service providers, discourage potential users from

We have operations outside of the U.S. that are subject to numerous operational and financial risks

We have operations in countries other than the U.S. and we are subject to the following risks inherent in international operations:

Additionally, in many foreign countries, particularly in certain developing economies, it is not uncommon to encounter business practices that are prohibited by regulations applicable to us, such as the Foreign Corrupt Practices Act and similar laws. Although we have undertaken compliance efforts with respect to these laws, our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, may take actions in violation of our policies and procedures. Any such violation, even if prohibited by our policies and procedures or the law, could have a material adverse effect. Any failure by us to effectively manage the challenges associated with the international operation of our business could have a material adverse effect.

Significant developments stemming from the 2016 U.S. presidential electiontrade policy or the Brexit vote could have a material adverse effect on us

There is uncertainty as to the presidential inaugurationactions that may be taken under a new Biden Administration with respect to U.S. trade policy with China. The imposition of any new U.S. tariffs on January 20, 2017, President Donald J. Trump and his administration took officeChinese imports or the taking of other actions against China in the United States. Asfuture, and any responses by China, could impair our ability to meet customer demand and could result in lost sales or an increase in our cost of merchandise, which would have a presidential candidate, President Trump expressed apprehension towards existing trade agreements, such as the North American Free Trade Agreement and the Trans-Pacific Partnership, and suggested that the U.S. would renegotiate or withdraw from these agreements. During the campaign, he also raised the possibility of significantly increasing tariffsmaterial adverse impact on goods imported into the United States, particularly from China and Mexico. On January 23, 2017, the President of the United States signed a presidential memorandum to withdraw the U.S. from the Trans-Pacific Partnership. This and other proposed actions, if implemented, could adversely affect our business because we sell imported products.and results of operations.

The potential impacts, if any, of the considerable uncertainty relating to Brexit or the terms of the new economic and security relationship between the U.K. and the E.U. on the free movement of goods, services, people and capital between the U.K. and the E.U., customer behavior, economic conditions, interest rates, currency exchange rates, availability of capital or other matters are unclear. Our business could be affected with respect to these matters during this period of uncertainty, and perhaps longer, by the impact of this vote.longer. In addition,particular, our business could be negatively affected by new trade agreements between the U.K. and other countries, including the U.S., and by the possible imposition of trade or other regulatory barriers, including the imposition of tariffs, in the U.K. which could result in shipping delays and shortages or increased costs of products sold by our business. Additionally, the U.K. economy and consumer demand in the U.K., including for our products, could be negatively impacted. Further, various geopolitical forces related to Brexit may impact the global economy, the European economy and our business, including, for example, due to other E.U. member states where we have operations proposing referendums to, or electing to, exit the E.U. These possible negative impacts, and others resulting from the U.K.’s actual withdrawal from the EU,E.U., may adversely affect our operating results.

We rely on independent shipping companies to deliver the products we sell

We rely on third party carriers to deliver merchandise from vendors and manufacturers to us and to ship merchandise to our customers. As a result, we are subject to carrier disruptions and delays due to factors that are beyond our control, including employee strikes, inclement weather and regulation and enforcement actions by customs agencies. For example, as a result of COVID-19 many consumers have significantly increased their use of ecommerce which has resulted in a significant increase in the volume of packages handled by third-party carriers, including those we rely on, which could cause us to experience delays in merchandise deliveries and cause our customers to experience delays in their order delivery. Any failure to deliver products to our customers in a timely and accurate manner may damage our reputation and brand and could cause us to lose customers. Enforcement actions by customs agencies can also cause the costs of imported goods to increase, negatively affecting our profits.

We are also impacted by increases in shipping rates charged by third party carriers, which over the past few years, have increased significantly in comparison to historical levels. We currently expect that shipping and postal rates will continue to increase. In the case of deliveries to customers, in each market where we operate, we have negotiated agreements with one or more independent, third party shipping companies, which in certain circumstances provide for favorable shipping rates. If any of these relationships were to terminate or if a shipping company was unable to fulfill its obligations under its contract for any reason, we would have to work with other shipping companies to deliver merchandise to customers, which would most likely be at less favorable rates. Other potential adverse consequences of changing carriers include:

Any increase in shipping rates and related fuel and other surcharges passed on to us by our current carriers or any other shipping company would adversely impact profits, given that we may not be able to pass these increased costs directly to customers or offset them by increasing prices without a detrimental effect on customer demand.

We depend on relationships with vendors, manufacturers and other third parties, and any adverse changes in these relationships could result in a failure to meet customer expectations which could result in lost revenue

We purchase merchandise from a wide variety of third party vendors, manufacturers and other sources pursuant to short- and long-term contracts and purchase orders. Our ability to identify and establish relationships with these parties, as well as to access quality merchandise in a timely and efficient manner on acceptable terms and cost, can be challenging. In particular, we purchase a significant amount of merchandise from vendors and manufacturers abroad, and cannot predict whether the costs for goods sourced in these markets will remain stable. We depend on the ability of vendors and manufacturers in the U.S. and abroad to produce and deliver goods that meet applicable quality standards, which is impacted by a number of factors, some of which are not within the control of these parties, such as political or financial instability, trade restrictions, tariffs, currency exchange rates and transport capacity and costs, among others.

Our failure to identify new vendors and manufacturers, maintain relationships with a significant number of existing vendors and manufacturers and/or access quality merchandise in a timely and efficient manner could cause us to miss customer delivery dates or delay scheduled promotions, which would result in lost sales or the failure to meet customer expectations and could cause customers to cancel orders or cause us to be unable to source merchandise in

sufficient quantities, which could result in lost revenue.

We face significant inventory risk

for products, however, can change significantly between the time inventory or components are ordered and the date of sale. In addition, when we begin selling a new product, it may be difficult to establish vendor relationships, determine appropriate product or component selection, and accurately forecast demand. The acquisition of certain types of inventory or components may require significant lead-time and prepayment and they may not be returnable. We carry a broad selection and significant inventory levels of certain products, such as consumer electronics, and at times we may be unable to sell products in sufficient quantities or to meet demand during the relevant selling seasons. Any one of the inventory risk factors set forth above may adversely affect our operating results.

The seasonality of our business places increased strain on our operations

Our net revenue in recent years indicates that our business is seasonal due to a higher volume of sales in the fourth calendar quarter related to year-end holiday shopping. In recent years, we have earned, on average, between 22%21% and 24% of our global revenue in each of the first three quarters of the year and between 30% and 32% of our global revenue in the fourth quarter of the year. If our vendors are not able to provide popular products in sufficient amounts (for example, due to the illness or absenteeism of our vendors’ workforces, government mandated shutdown orders, impaired financial conditions or other reasons resulting from the COVID-19 pandemic) such that we fail to meet customer demand, it could significantly affect our revenue and our future growth. The supply of such products may not return to pre-COVID-19 levels, and if so, product supplies may return to pre-COVID-19 levels at different times, and our efforts to ensure popular products are in stock may not be successful. If too many customers access our websites within a short period of time due to increased holiday demand, we may experience system interruptions that make our websites unavailable or prevent us from efficiently fulfilling orders, which may reduce the volume of goods we offer or sell and the attractiveness of our products and services. In addition, we may be unable to adequately staff our fulfillment network and customer service centers during these peak periods and delivery and other third party shipping (or carrier) companies may be unable to meet the seasonal demand. Risks described elsewhere in this Part I, Item 1A relating to fulfillment network optimization and inventory are magnified during periods of high demand.

To the extent we pay for holiday merchandise in advance of the holidays (i.e., in August through November of each year), our available cash may decrease, resulting in less liquidity. We have limited availability under our revolving credit facility and may not be able to access financing to the extent our cash balance is impaired. We may be unable to maintain a level of cash sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

Our success depends in large part on our ability to recruit and retain key employees capable of executing our unique business model

We have not voluntarily implemented various corporate governance measures, in the absence of which you may have more limited protections against interested transactions, conflicts of interest and similar matters

Federal legislation, including the Sarbanes-Oxley Act of 2002, encourages the adoption of various corporate governance measures designed to promote the integrity of corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors'directors’ independence and audit committee oversight.

As a “close corporation” under Delaware law, our stockholder, rather than a board of directors, manages our business. Our stockholder is an indirect wholly owned subsidiary of Liberty,Qurate Retail, meaning that we do not have any independent governing body. In addition, we have not adopted corporate governance measures such as the implementation of an audit committee or other independent governing body. It is possible that if we were to appoint a board of directors and include one or more independent directors and adopt some or all of these corporate governance measures, there may be somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. However, our stockholder has the ability to make decisions regarding transactions with related parties and corporate actions that could involve conflicts of interest.

In addition, our Chief Executive Officer and President, Michael A. George, became a namedpresident and chief executive officer and director of LibertyQurate Retail during 2011.2018. Investors should bear in mind our current lack of independent directors, the positions with LibertyQurate Retail that are held by Mr. George and corporate governance measures in formulating their investment decisions.

The interests of our stockholder may not coincide with your interests and our stockholder may make decisions with which you may disagree

Our stockholder is an indirect wholly owned subsidiary of Liberty.Qurate Retail. As a “close corporation” under Delaware law, our stockholder, rather than a board of directors, manages our business. As a result, LibertyQurate Retail controls certain aspects of our management, including the approval of significant corporate transactions such as a change of control. The interests of LibertyQurate Retail may not coincide with our interests or your interests. For example, Liberty'sQurate Retail’s dependence on our cash flow for servicing Liberty'sQurate Retail’s debt and for other purposes, including payments of dividends on Liberty'sQurate Retail’s capital stock, stock repurchases or to fund acquisitions or other operational requirements of LibertyQurate Retail and its subsidiaries is likely to result in our payment of large dividends to LibertyQurate Retail when permitted by law or the terms of our senior secured credit facility and the indentures governing our outstanding senior secured notes, which may increase our accumulated deficit or require us to borrow under our senior secured credit facility, increasing our leverage and decreasing our liquidity. We have made significant distributions to LibertyQurate Retail in the past. See Item 1. "Business - LibertyQurate Retail relationship and related party transactions."

Our level of indebtedness could limit our flexibility in responding to current market conditions, adversely affect our financial position, prevent us from meeting our obligations under our debt instruments or otherwise restrict our business activities

The existence of and limitations on the availability of our debt could have important consequences. The existence of debt could, among other things:

Limitations imposed as a part of the debt, such as the availability of credit and the existence of restrictive covenants may, among other things:

Despite our current level of indebtedness, we may still incur substantially more indebtedness, whichindebtedness. This could exacerbate the risks associated with our existing indebtedness

We and our subsidiaries may incur substantial additional indebtedness in the future. Our senior secured credit facility and the terms of the indentures for our notes will limit, but do not prohibit, us or our subsidiaries from incurring additional indebtedness. Also, our subsidiaries could incur additional indebtedness that is structurally senior to the notes or we and our subsidiaries could incur indebtedness secured by a lien on assets that do not constitute collateral, including assets of ours and our subsidiaries, and the holders of such indebtedness will have the right to be paid first from the proceeds of such assets. If we incur any additional indebtedness that ranks equally with the notes and the guarantees, the holders of that indebtedness will be entitled to share ratably with the holders of the notes and the guarantees in any proceeds distributed in connection with our insolvency, liquidation, reorganization or dissolution. This may have the effect of reducing the amount of proceeds paid to the existing note holders. In addition, existing note holders'holders’ rights to the collateral would be diluted by any increase in the indebtedness secured by this collateral. If new indebtedness is added to our current debt levels, the related risks that we and our subsidiaries now face could intensify.

Covenants in our debt agreements restrict our business in many ways

Our senior secured credit facility and the indentures governing the notes contain various covenants that limit our ability and/or our restricted subsidiaries'subsidiaries’ ability to, among other things:

Our ability to pay dividends or make other restricted payments to LibertyQurate Retail is subject to limited restrictions

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

QVC engages with General Communication, Inc. ("GCI"), an Alaska corporation, and Liberty Interactive LLC,Zulily, which has been a Delaware limited liability company and a direct wholly-owned subsidiary of Liberty, whereby Liberty will acquire GCI through a reorganization in which certain assets and liabilities attributed to Liberty’s Ventures Group will be contributed to GCI in exchange for a controlling interest in GCI. Liberty will then effect a tax-free separation of its controlling interest in the combined company. The transactions are expected to be consummated on March 9, 2018, subject to the satisfaction of customary closing conditions. Simultaneous with that closing, the QVC Group common stock will become the only outstanding common stock of Liberty, and thus QVC Group common stock will cease to function as tracking stock and will effectively become regular common stock. In addition, Liberty will be renamed Qurate Retail Group, Inc., with QVC, HSN and zulily as wholly-owned subsidiaries. On December 29, 2017, Liberty completed the acquisition of the remaining 62% ownership interest of HSN in an all-stock transaction. HSN is attributed to the QVC Group. The QVC Group does not represent a separate legal entity; rather, it represents those businesses, assets and liabilities that are attributed to that group. HSN is not included in the results of operations or financial position of QVC presented in the Company's consolidated financial statements.

In the fourth quarter of 2018, QVC recorded a charge related services totaling less than $3 million, which did not have a material impactto the potential closure of its operations in France. The formal announcement to execute the closure was made in March 2019 and broadcasting for QVC in France was subsequently terminated on QVC's financial position, results of operations, or liquidity. On July 22, 2016, Liberty completed the spin-off of CommerceHub. As a result, Liberty and CommerceHub are now separate publicly traded companies.March 13, 2019.

The channel allows viewers to have access to a broader range of QVC programming options as well as more relevant programming for viewers in differing time zones. In October 2016, QVC-U.S. launched a third channel, Beauty iQ, which is being distributed through satellite and streaming platforms. The channel and supporting platforms are dedicated to a complete beauty shopping experience for customers.

There is uncertainty as to the U.K. invoked Article 50actions that may be taken under a new Biden Administration with respect to U.S. trade policy with China. The imposition of any new U.S. tariffs on Chinese imports or the taking of other actions against China in the future, and any responses by China, could impair our ability to meet customer demand and could result in lost sales or an increase in our cost of merchandise, which would have a material adverse impact on our business and results of operations.

In December 2019, the COVID-19 pandemic was reported to have surfaced in Wuhan, China and has subsequently spread across the globe, including all of the Treatycountries in which QVC operates. As a result of Lisbon,the spread of the virus, certain local governmental agencies have imposed travel restrictions and imposed local quarantines or stay at home restrictions to contain the spread, which has caused a significant disruption to most sectors of the economy. In response to these stay at home restrictions, QVC has mandated that non-essential employees work from home and has reduced the number of employees who are allowed on its production set and has implemented increased cleaning protocols, social distancing measures and temperature screenings for those employees who enter into certain facilities. In some cases, the move to a work from home arrangement for our non-essential employees will be permanent, which may result in the reduction of office space. We have also mandated that all essential employees who do not feel comfortable coming to work will not be required to do so. As a result of these resource constraints, QVC included fewer hours of live programming on some of its secondary channels and has experienced some delays in shipping at certain fulfillment centers. In certain markets, QVC temporarily increased the wages and salaries for those employees deemed essential who do not have the ability to work from home, including production and fulfillment center employees. The total increase in wages and salaries of $10 million was recorded during the year and is primarily recorded in cost of goods sold for the year ended December 31, 2020. QVC has also paid a one-time work from home allowance to its employees during the second quarter of 2020 totaling $4 million, which is primarily recorded in selling, general and administrative expenses for the first stepyear ended December 31, 2020. The inability to control the spread of COVID-19, or the U.K.’s formal exit from the E.U. This started the two-year window in which the U.K. and the European Commission can negotiate future terms for imports, exports, taxes, employment, immigration and other areas, endingexpansion or extension of these stay at home restrictions could negatively impact our results in the exit of the U.K. from the E.U.future.

The current Presidentstay at home restrictions imposed in response to COVID-19 required many traditional brick and mortar retailers to temporarily close their stores, but allowed distance retailers, including QVC, to continue operating. As a result, beginning at the end of the U.S. has expressed apprehension towards existing trade agreements,March 2020, we observed an increase in new customers and an increase in demand for certain categories, such as home. However, QVC may not be able to retain these new customers after the North American Free Trade Agreementpandemic subsides and any increases in demand in our product categories during the Trans-Pacific Partnership, and suggested that the U.S. would renegotiate or withdraw from these agreements. He also raised the possibility of significantly increasing tariffs on goods imported into the United States, particularly from China and Mexico. On January 23, 2017, the President of the U.S. signed a presidential memorandum to withdraw the U.S. from the Trans-Pacific Partnership. This and the other proposed actions, if implemented, could adversely affect our business because we sell imported products.pandemic may be temporary.

Results of OperationsOperations- QVC Consolidated

During the years ended December 31, 20172020 and 2016,2019, the changes in revenue and expenses were affected by changes in the exchange rates for the Japanese Yen, the Euro and the U.K. Pound Sterling. In the event the U.S. Dollar strengthens against these foreign currencies in the future, QVC's revenue and operating cash flow will be negatively affected. Our product margins may continue to be under pressure due to the devaluation of foreign currencies and we will attempt to reduce our exposure through pricing and vendor negotiations, as Brexit negotiations progress.

In discussing our operating results, the term "currency exchange rates" refers to the currency exchange rates we use to convert the operating results for all countries where the functional currency is not the U.S. dollar. We calculate the effect of changes in currency exchange rates as the difference between current period activity translated using the prior period's currency exchange rates. Throughout our discussion, we refer to the results of this calculation as the impact of currency exchange rate fluctuations. When we refer to "constant currency operating results", this means operating results without the impact of the currency exchange rate fluctuations. The disclosure of constant currency amounts or results permits investors to understand better QVC’s underlying performance without the effects of currency exchange rate fluctuations.

In 2017, QVC-U.S.2020, the QxH net revenue increase was primarily due to a 3.7%1.8% increase in units shipped, and a $171 million decrease in estimated product returns. Thisreturns and a $7 million increase was offset by a 2.9% decrease in ASP, a $32 million decrease in shipping and handling revenue, andpartially offset by a $14 million decrease1.3% decline in miscellaneous income. QVC-U.S.ASP. For the year ended December 31, 2020, QxH experienced shipped sales growth in home and accessories with declines in all categories except jewelry.other categories. The decrease in estimated product returns was primarily duedriven by a shift in product mix to an overall lower return rate categories, partially offset by an increase in sales volume. The increase in shipping and handling revenue was primarily driven by the increase in units shipped and fewer promotional offers. QVC-International net revenue growth in constant currency was primarily due to a 4.6% increase in units shipped, driven by increases in units shipped across all markets, a 1.5% increase in ASP, driven by ASP increases in Germany and the U.K., and a $15 million increase in shipping and handling revenue driven by increases in all markets except Italy, primarily due to the increase in units shipped. QVC-International experienced shipped sales growth in constant currency in home, beauty and electronics with declines in all other categories.

In 2019, the QxH net revenue decrease was primarily due to a 2.8% decrease in units shipped, a 0.5% decrease in ASP and an $18 million decrease in shipping and handling revenue. This decrease was partially offset by a $65 million decrease in estimated product returns, primarily driven by the decrease in sales volume. QxH experienced shipped sales decline in all categories except jewelry.electronics. The decrease in net shipping and handling revenue was a result of a decrease in shipping and handling revenue per unit from promotional offers. QVC-International net revenue growth in constant currency was primarily due to a 5.0%5.1% increase in ASP, including increases in all markets. The increase was partially offset by a decrease of 2.5% in

units shipped, primarily driven by Germany, the U.K., and Italy partially offset by increases in Japan, Germany, France and the U.K. offset by a decrease in units shipped in Italy. There was a $5$22 million increasedecrease in shipping and handling revenue, primarily driven by Japan. This was offset by a decrease of 1.0% in ASP, primarily driven in Japan and Germany offset by increases in Italy and the U.K. and a $20$16 million increase in estimated product returns driven byacross all markets except Japan.markets. QVC-International experienced shipped sales growth in constant currency in all categories except electronics and jewelry.accessories.

QVC's cost of goods sold as a percentage of net revenue remained consistent at 63.8%was 64.7%, 65.1%, and 64.2% for both the years ended December 31, 20172020, 2019 and 2016 and was 63.2% for the year ended December 31, 2015.2018, respectively. The slight increasedecrease in the cost of goods sold as a percentage of revenue in 2016 was2020 is primarily due

to strategic promotional and pricing initiatives, which decreased product marginscosts as a percentage of net revenue across QxH, Japan and increased freight costs in the U.S. associated with the increases in units shippedGermany, and favorable estimated product returns at QxH, which was partially offset by increased fulfillment costs at QxH, primarily related to increased freight charges. For 2019, the increase in cost of goods sold as a favorable inventory obsolescence provisionpercentage of revenue is due to an increase in the U.S.product fulfillment costs primarily related to a new fulfillment center in Bethlehem, Pennsylvania and higher freight costs at QxH.

QVC's operating expenses are principally comprised of commissions, order processing and customer service expenses, credit card processing fees and telecommunications expenses. Operating expenses decreased $5increased $18 million or 0.8%2% and decreased $1$113 million or 0.2%13% for the years ended December 31, 20172020 and 2016,2019, respectively as compared to the corresponding prior year. Operating expenses were 6.9% and 7.0% of net revenue for the years ended December 31, 2020 and 2019, respectively.

The decrease in 20172019 was primarily due to a $92 million decrease in commissions primarily at QxH, a $13 million decrease in personnel costs, primarily at QxH and to a lesser extent, Italy, Germany and Japan, and a $5 million decrease due to favorable exchange rates. The slight decrease in 2016 wascommissions is primarily due to lower telecommunication expense offset bynew longer term television distribution rights agreements entered into at HSN, with similar terms to QVC’s television distribution agreements, which led to increased commissions expense. The decrease in telecommunication expense was primarily due to lower phonecapitalization of television distribution rights agreements and network rates in the U.S. The increase in commissions expense was primarily due to increases internationally offset by a decrease in sales in the U.S.favorable terms on commissions.

QVC's SG&Aselling, general and administrative expenses (excluding transaction related costs as defined below and stock-based compensation) include personnel, information technology, provision for doubtful accounts, credit card income,losses, production costs, and marketing and advertising expenses. Such expenses decreased $21increased $123 million, and decreasedincreased to 7.7%10.6% of net revenue for the year ended December 31, 20172020 as compared to the prior year and decreased $18$6 million and decreased to 8.0%was 9.9% of net revenue for the year ended December 31, 20162019 as compared to the prior year as a result of a variety of factors.year.

The decreaseincrease in 20172020 was primarily due to a decrease in bad debt expense of $35 million, a decrease in severance expense of $13 million, $4 million from favorable foreign currency rates and a $6$111 million increase in credit card income offset by an increase in bonus expense of $33 million andpersonnel costs across all markets, a $4$53 million increase in online marketing expenses. Theprimarily at QxH and $7 million in unfavorable exchange rates. These increases were partially offset by a $34 million decrease in bad debt expense wasestimated credit losses primarily at QxH and to a lesser extent, Japan, a $14 million decline in outside services primarily at QxH and a $10 million decrease in travel expenses across all markets. The increase related to lower default rates associated with the Easy-Pay program in the U.S. The increase in credit card income was due to the favorable economics of the QVC-branded credit card ("Q card") portfolio in the U.S. The increase in marketing expensespersonnel costs was primarily due to an increase in the investment made to eMarketingour estimated incentive pay across all markets and a work from home allowance as a result of COVID-19, which was partially offset by discontinuing the naming rightsclosure of our operations in France in 2019. The decrease to estimated credit losses was due to favorable adjustments based on actual collections, a decrease in the Chiba Marine Stadiumnumber of installment counts offered to and taken by customers, enhanced risk screening and a favorable shift in Japan.product category mix. The decrease in travel expenses was primarily due to less travel as a result of COVID-19.

The decrease in 20162019 was primarily relateddue to reduceda $43 million decrease in personnel costs of $63 millionprimarily in QxH, France and an increase of credit card income of $8 million which wasthe U.K. partially offset by increases in Japan, Germany and Italy, and an $11 million decrease due to favorable exchange rates. The decreases were partially offset by a $22 million increase in outside services, primarily at QxH and Japan, partially offset by a decrease in Germany, a $12 million increase in bad debt expense, of $25and a $16 million software expense of $13 million, franchise tax expense of $10 million and external services of $8 million.increase in online marketing expenses primarily in QxH. The decrease in personnel costs was primarilyis due to a decrease in bonuseswages at QxH as a result of QRG Initiatives, a

decrease in bonus compensation across all markets except Japan, the termination of a retirement health plan and benefitsthe closure of QVC's operations in the U.S. and severance. The increase in credit card income was due to the favorable economics and usage of the Q card portfolio in the U.S.France, partially offset by higher severance costs across all markets. The increase in bad debt expense was primarily related to an increase in U.S. Easy-Pay sales penetration and default rates. The increase in software expense was mainly due to an increase in software licensing and software maintenance. The increase in franchise tax expense was mainly due to a favorable franchise tax reserve adjustment related to an audit settlement in 2015 which was not experienced infor the year ended December 31, 2016. The increase in external services was2019 is primarily due to internal control enhancementsincreased Easy Pay usage and the establishmentnumber of installments taken at QxH.

Adjusted Operating Income before Depreciation and Amortization ("Adjusted OIBDA")

Seasonality

Financial Position, Liquidity and Capital Resources

Off-balance Sheet Arrangements and Aggregate Contractual Obligations